Steelmakers call for a moratorium on raising Ukrainian Railways tariffs

Ukrmetalurgprom, an association of Ukrainian iron and steel companies, calls on the government to impose a two-year moratorium on tariff increases for Ukrainian Railways (UZ) and to conduct an audit of the state-owned company, UNIAN reports.

The 37% increase in freight transportation tariffs proposed by UZ will have catastrophic consequences for the economy, according to a letter addressed to Prime Minister Denys Shmyhal and Deputy Prime Minister for the Restoration of Ukraine, Minister of Community and Territorial Development Oleksiy Kuleba.

According to the appeal, according to available information, on November 28, Oleksiy Kuleba met with the management of UZ, where it was decided to prepare a draft order to index freight railroad tariffs with a 37% increase.

“This decision has caused great concern among miners and seelmakers of Ukraine, who are categorically opposed to such a step. After all, the consequences for the country’s economy will be catastrophic, with the shutdown of strategic enterprises and a significant reduction in foreign exchange earnings,” the letter says.

Ukrmetalurgprom reminds that railways are the main means of cargo transportation in Ukraine. While in Germany the total share of rail freight transportation does not exceed 20%, in our country it provides almost 82% of freight and 36% of passenger transportation.

As emphasized, the Ukrainian industrial business community has already experienced significant financial pressure after a series of freight tariff increases in 2021 and 2022, which led to a record increase in rail transportation costs.

According to Ukrmetalurgprom, the tariff increase will not solve UZ’s problems unless the operator’s structure is reformed and internal resources are attracted. Currently, Ukrainian Railways’ expenses are growing faster than its revenues, which requires an urgent review of its spending policy.

According to the letter, due to the constant unreasonable increase in freight tariffs, a significant number of domestic industries are gradually abandoning UZ services, preferring alternative transportation methods, and in the worst case scenario, significantly reducing production or stopping.

“Instead of keeping cargo on the railroad and increasing its cargo base, UZ is expanding its cost base. After all, since September 2023, UZ has not sold a single lot of scrap – although the sale of scrap  generates billions of hryvnias in additional revenue,” the UMP emphasized.

The association called on the government to initiate measures to improve the financial condition of UZ, in particular, to develop the cargo base and optimize costs, as well as to increase the efficiency of the state monopoly’s assets. In addition, Ukrmetallurgprom believes that a moratorium on raising railroad freight tariffs should be imposed until martial law is lifted and for at least two years after the end of hostilities.

Ksenia Orynchak, Executive Director of the National Association of the Extractive Industries of Ukraine, said that a 37% increase in Ukrainian Railways’ tariffs could destroy the mining industry. Already, companies in the industry are shutting down operations due to rising logistics and electricity tariffs.